Health Care: What's Next?

by Peter Pratt, Ph.D., Vice President and Senior Consultant for Health Policy

Although the recent election reflected citizen dissatisfaction with the president’s handling of health care reform, the issue still is very much in the public mind. This Advisor reports on public opinion in the matter and suggests what we may expect in the way of reform at the state and federal levels in 1995.

Election Post Mortem

Discussion about health care was muted in the fall campaign. Few candidates talked about it, perhaps recognizing that everyone had heard all s/he could stand of the increasingly partisan and increasingly fatuous debate. If there was any blessing in the relentless stream of inane political ads, it was that candidates decided not to be inane about health care.

As election results and exit polls illustrate, however, the health care issue remains planted firmly in the public’s mind. The dramatic gains made by Republicans in the U.S. Senate and House of Representatives were largely a result of voters’ dissatisfaction with President Clinton. And the version of President Clinton that prevails over all others is the one who tried to pass sweeping social legislation to create “a government-run health care system.”

It is not much of a stretch to say that the elections for federal office were a thinly veiled referendum on the president’s abysmal handling of health care reform. The steady, committed architect of bipartisan support for NAFTA or GATT is not the Clinton that people remember. In voters’ minds, he was the confused compromiser, the old-style Democrat who thinks government can solve everything and at the expense of the struggling middle class. The fact that President Clinton viewed his health care reform plan as a “new Democrat” strategy for putting government at the service of the private sector only makes sadder his failure to get across his message to the American public.

If the election was partly a referendum on Clinton’s health care reform failure, the issue itself, divorced from its troubled messenger, still preys on the public’s mind. Exit polls nationwide found that voters ranked health care as the most pressing issue, ahead of crime, education, taxes, and jobs. This reflects the results of a September Michigan Hospital Association/Public Sector Consultants survey of state residents. While we found that support for rebuilding the health care system has declined dramatically in the last year, Michigan residents are unwavering in their fundamental belief and most pressing fears:

Seventy-four percent believe that government has a moral responsibility to deliver health care services to people who cannot afford them.

Seventy percent worry that they will be unable to afford health insurance in the future.

Fifty-four percent fear that a preexisting condition may prevent a family member from getting insurance.

What is remarkable about these numbers is that they have gone up since the rancorous debate on health care reform began last spring.

Survey participants rejected the status quo and the ideological extremes; the former is even less popular than the latter. The extremes tested were (1) a conservative, free-market approach—tax incentives and no employer mandate—and (2) a Canadian style, single-payer system. Each received only meager support, from 13 to 15 percent of respondents. The approach receiving the most support (from 47 percent of respondents) was double pronged: an employer mandate, as the means to achieve universal coverage, and a blend of regulation and competition, as the means to hold down prices. If the approach that gets the most support sounds oddly familiar, it is because it is a thumbnail sketch of the Clinton plan. The most important conclusion that may be drawn from our survey is that Michiganians, despite the thumbs-down-on-the-president results of the recent election, are uncomfortable with ideological extremes where health care is concerned, and, in fact, support the principlesmanifested in the Clinton plan.

In our survey we described his plan not by name but as the option that “guarantees coverage for all citizens, uses regulation and competition to hold down prices, and requires employers and employees to contribute to the cost of insurance.” The principles embodied in this option appeal to most people’s belief that we all should have health insurance and that responsibility for it should be shared, by employers and employees. It is the president’s ill fortune that he could not make the connection in the voters’ minds between their principles and his plan.

Most significant is the public’s apparent recognition that regulation and competition both are necessary if health care reform is to succeed. Few health economists would dispute this common-sense approach to the health care marketplace.

Engler and Government’s Role in Health Care Reform

Our survey results suggest, rather compellingly, that most Michi-ganians believe that government has a role in health care. Most people are not against government as such; they hold out hope that, in certain arenas, government can improve the lives of its citizens. And this is why there is, as our survey reveals, a growing belief in government’s moral responsibility to assure health care for those who cannot afford it. This is why a plan that baldly calls for regulation and competition is preferable to other alternatives. This is why 40 percent of survey respondents feel it “very” important and another 29 percent feel it “somewhat” important that Michigan government enact health care reform.

Michiganians foreswear national health care reform because they do not trust the president, but their trust in John Engler draws them to him for leadership in this troubling arena. Who better to lead the way on health care reform than a governor skeptical of government?

This is not as surprising as it sounds. To the Michigan voters in the middle—those who vote for people and not for conservative or liberal ideologies, Engler is not really antigovernment—he just has a common-sense view of government’s role. He may toss out a paragraph of antigovernment rhetoric when the time is right, but he was reelected because a majority of voters thinks he is making government work for them. He has instilled confidence in government—a limited-but-activist government. Although my evidence is only anecdotal, a remarkable number of people voted for Engler despite serious disagreement with key positions or actions he took. He is a leader, a government leader, and people are hungry for that.

Michigan Health Care in 1995

Of course, there still is the difficult task of translating all this principle and fear (about affordability, exclusion, and so forth) into practice, and the translation is what doomed Clinton. This difficulty is a de facto argument for incremental reform. At least in the near term, most Michigan residents probably want less government involvement in health care than their principles suggest. Nevertheless, they clearly want some response to their concerns.

To be sure, the governor faces matters more pressing than health care reform. K–12 education (charter schools, quality, schools of choice), making government more efficient and effective (the Secchia Commission report, a look at civil service), the single business tax and other economic competitiveness issues, automobile insurance reform, casino gambling, and the Detroit stadium promise to consume much of his attention in the next six months. The governor likely will watch Congress to see what incremental reform steps it takes, before embarking on efforts here.

In the spring or sooner, however, look for the governor to consider several health care initiatives outlined in his campaign policy document, Making Michigan Number One: Continuing Our Mission of Change and Reform. They include:

encouraging development of voluntary purchasing groups, to allow businesses, especially smaller firms, to gain leverage in the health care and health insurance marketplaces (in the document, Engler pledges to “work to save taxpayer dollars by making state government a partner with other employers who are forming purchasing groups to obtain discounts and reduce the cost of employee health care”);

encouraging cooperation among government, health care providers, insurers, and payers, to develop reliable measures of health care quality and outcomes and make them available to consumers in useful formats;

expanding use of mobile public health clinics, to improve access to preventive and primary care services for those in need;

expanding access for the uninsured, through a Medicaid buy-in (Engler will “continue to explore alternatives, including federal waivers, to increase access to affordable health care coverage for Michigan’s low-income and uninsured people”).

This last initiative is also a priority of state Rep. John Jamian, who in January will assume sole leadership of the House Public Health Committee. Engler and Jamian may look to Medicaid as the most cost-effective avenue for expanding coverage for the uninsured: After all, the feds pay more than half the bill if they have approved waivers allowing states to depart from the regulations in running certain aspects of the program, and the Clinton administration has shown great willingness to encourage state innovation and flexibility by such means.

Congressional Republicans, however, have other ideas. They see bloated Medicare and Medicaid budgets as major obstacles to significant deficit reduction. Although the battles to cut these entitlements will be ferocious, Medicaid is always an easier target than is Medicare. But federal cuts in Medicaid will hamper state efforts to move toward universal health coverage. Add to this the $400 million plus that Michigan will lose when a federal loophole for disproportionate-share hospital payments is closed, and you have the threat of cuts stateside as well. In the meantime, Michigan continues to move aggressively toward enrolling most, if not all, Medicaid recipients in managed care, which will reduce costs.

In crafting the state House’s direction with regard to health care, Representative Jamian will draw on the report, released last May, of the House Republican Special Committee on Health Care. The document espouses the view that the current health care system is fundamentally sound and only comparatively minor changes are needed to improve it. Thus, in addition to the Medicaid buy-in proposal, look for him to favor such incremental reforms as insurance market reform (limiting exclusion for preexisting conditions, guaranteeing health insurance contract renewal), tax incentives to encourage employers to offer and employees to purchase health insurance, and any-willing-provider legislation. Representative Jamian appears to have an anti-regulation bent, and this will influence the legislation he pushes.

In the state Senate, at this writing, a replacement had not yet been named for retiring Health Policy and Senior Citizens chair, John Pridnia. In the meantime, Sen. John Schwarz, a moderate who also is a physician, has convened informally a small group of people from the administration, the Senate, hospitals, physicians, HMOs, businesses, and insurers, to discuss their organizational priorities for health care in the year ahead. Senator Schwarz explains that he is trying to find out if there is the political will to do anything, and if so what, in health care. Like Jamian, Schwarz sees no need to alter radically our current health care delivery and finance system.

In general, the Republican-controlled executive branch and legislature likely will be looking to government to encourage or facilitate private-sector solutions to health care problems. The continued growth of managed care, a new wave of hospital consolidation and physician organizations (slowed only by antitrust legislation, which may be changed by Congress), and the evolution of voluntary purchasing alliances will intensify pressure to contain health care costs. The question remains whether these measures will be enough.

Change also is proceeding apace at the local level: Many communities are embarking oncomprehensive community health needs assessments—efforts to gauge local health issues and measure delivery of care. All over the state there is recognition that localities must bring together everyone involved—consumers, providers, and payers—to identify and then address priority health care problems.

Federal Reform in 1995

With the ascendancy of the Republicans, federal health care initiatives will concentrate on small market-insurance reform (limits on exclusions for preexisting conditions, coverage portability from job to job, and guaranteed policy renewal) and tax-free medical care savings accounts. The latter are allowed by a new Michigan law, but congressional action is needed to achieve the much-desired federal tax exemption for them. Antitrust relief for health care providers and medical liability reform also are on the Republicans’ health care agenda.

Even if the Democrats had retained control of Congress, health care reform would have been scaled back considerably from the comprehensive Clinton proposal and its motley offspring. To the mind of most Americans, especially the middle class, Clinton lost sight of their health care fears. In one way or another, the fight for universal coverage has come to be seen as help for lower income people, not the middle class. Most of the public feels that insuring everyone will just drive up the cost of health care for those who have it now.

And so, in 1995, cost containment, and not universal coverage, is said to be the focus of health care reform discussions. There is just one problem: Containing health care costs significantly will force the middle class to tighten its belt just as much as Clinton’s plan would have. And aside from cuts to Medicare, there is little talk in Washington of significant cost containment for the middle class. And then there is the recent news from the Health Care Financing Administration: For the first time in a decade, Medicare outlays per enrollee grew faster than private insurers’ outlays per policyholder. The faster Medicare costs grow, the more painful it is of course to bring them under control.

There is much talk, too, that the private sector, if left on its own, will bring down health care costs. While this is probably true to some extent, the question is whether it will bring them down enough and keep them down long enough to make a difference. National health spending increased 7.8 percent from 1992 to 1993, more than twice the rate of general inflation. And there still is the matter of millions of people without health insurance.

The best guess is that Congress will take small steps in 1995 toward addressing the pressing issues of cost and access, the American public (still smarting from the Clinton reform debacle) will continue to hold tight on dramatic changes to our health care system, and that within three or four years, comprehensive health care reform will be back on the table. But if the Clinton Plan and the Clinton strategy were wrong in 1993 and 1994, the inevitable return of public push for broader reform really will test the mettle of limited government. Maybe then, however, we finally can have a true national debate, one that engages the public and forces us to make tough decisions about cost containment, access, and choice in our health care system.